Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

jackb

Fail Statistics

Recommended Posts

Has anybody ever ran across any definitive studies about speculative trader fail rates (i.e., the net of the trader's career resulting in lost money)? All I've ran across are antecdotal reports. It won't surprise me that the oft mentioned figures of 90-99% are fairly accurate, but I'd love something more concrete to reference.

 

Whatever that number is, what's interesting is how little attention is given to the non-fail (remainder) stat. I get the sense that most newbie traders fixate on that remainder percent figure as the rarefied stratum (a supposed "success" level) they must shoot for. But that's not quite right, is it?

 

That remainder stat is just the beginning of non-fails and, as such, it has its own spectrum of non-failing: beginning with breakeven and topping out at some CAGR that some spec trader has been able to achieve over a significantly long period (minimum of at least 20 years).

 

So take whatever the definitive fail rate is, add to it the percentage points comprised by all the breakeven traders as well as all the other traders that are achieving returns that would not support "making a living" for you given your capital base and lifestyle and isn't that the stat one needs to focus on?

 

If you arbitrarily group those non-fail traders into something like: Breakeven - 5%; Over 5% up to 10%; Over 10% up to 15%; etc., I suspect a disproportionate weighting will be found in the groups below 10% and that a insignificant number will be found in the groups above 20% CAGR.

 

Exactly how small does that stat fall to given that one needs/wants/desires at least 20%?

Share this post


Link to post
Share on other sites

How is this statistic useful? If you're one of the 'fails' it may reassure you that you're not alone, but it still doesn't show you where you went wrong. If you're one of the others, you don't need to concern yourself with it. I you're not a trader, surely there are better things to do in life :-)

 

Max

Edited by maxr

Share this post


Link to post
Share on other sites

I dont know about the lies lies and damn stats,

but from experience I have seen many traders over the years, make more money for them selves, in bonuses etc; than they did for their clients. Usually as their trading records are something like....

+120%, +30%, +72%,+100%,-10%,+20%, -300%

Its that last one that does the damage.

 

Whilst working for yourself is completely different. There is no one to bail you out.

The successful traders - I do know a few - probably about 1% of all those traders I have known, usually have trading records along the line of

+30%,+10%,+40%,+15%,2%,-5%,+25%.....

given this effort for consistency, after costs, after taxes and after living expenses, growing an account requires a larger base equity amount to start with, otherwise eventually inflation will still get you over the life of the person (20 + yrs).

So the fail rate can still be high even for those who make money.

 

Now you also have to distinguish between those that trade and those that make markets, those that follow indexes, those that operate peoples orders, those that do merger arbs, those that trade order flow for a bank etc.

Not that there is anything wrong with these, but very few traders actually end up taking on risk as such and make a living from "pure" speculative trading. :2c:

Share this post


Link to post
Share on other sites

Good thread and thoughts.

 

I'm with Siuya on the track records he shows. In another life when I did manage some funds it amazed me how often we'd talk in single digit monthly returns and we'd get laughed right on out of there. As if it was an insult if you weren't talking 10%+ monthly returns, 100%+ a year. Of course that tends to be your 98%. With crazy expectations. They want 100%+ a year, with 5% max drawdowns. It just doesn't happen.

 

So I would definitely agree that more than likely the bigger group of successful traders are not the ones making 500% a year -- those are the outliers and exceptions and more than likely to implode anyway the following year. That 10% - 30% range though with modest drawdown I'd say is the bulk of those who are successful.

 

Granted the far reaching majority will never cross the break-even threshold and I'd say one major reason is greed, another is the desire to always be right. Which you're going to get spanked by trading on a daily basis. No matter how hard you work.

 

If I was to guess? I think if you are willing to really work hard and be committed with some good guidance 10% - 20% can definitely succeed. Maybe more. However, most will not work hard so if you look at the macro I'd bet it is 1% - 2%.

 

MMS

Share this post


Link to post
Share on other sites

A few years ago I saved a link on my "Favorites" menu that dealt with this very issue:

 

Success Rates of Traders

 

The author gives some good advice and has uncovered a couple of probably now well-out-of-date studies. But it is a useful read, and I found more to awaken me in his conclusion: reasons to avoid trading!

 

But even if the true failure rate of traders was known BEFORE they commenced this pathway ... would it have deterred them?

 

I think not.

 

In my own case, I was looking at having to retire in about 10 years, and had nothing on earth to show for it. To keep it short, I was not prepared financially for retirement. I had no option but to "have a go" ... and once on the path, I did not turn back.

 

I am grateful for the persistence and commitment that somehow developed from my early years. Because it is this, and passion for financial instruments, rather than any other other factor, that led me to believe I have passed the test.

 

Those with true passion have a chance.

 

Those with obsession may likely have a very tough time of it.

 

Google brought up other interesting links which you can find yourself, but in the couple I read, there seems to be no research-based study that defines exactly what the true rate is.

 

 

Finally - I think the figure is always going to be elusive because as trading becomes more sophisticated, and as struggling traders seek out education and mentors as useful tools, the figures might swing like a pendulum. But there are ever increasing numbers joining us every day, seeking their fortunes.

 

How many of them know what they are getting themselves in for?

 

I have to agree with Siuya too - even if a trader can make money, the taxes, and living costs will still consume a chunk of it.

 

But it is obviously still an attractive pastime. The numbers do not seem to be dwindling.

Share this post


Link to post
Share on other sites

Thank you everyone for your replies and thanks for the link MightMouse.

 

MMS, your comments about getting laughed at by others when talking about single digit monthly returns is timely as I recently read through the "The Truth of Trading" thread. I saw that exact thing, where certain members were infuriated that low rates of return were being discussed as realistic. I suspect it's a bit of cognitive dissonance.

Share this post


Link to post
Share on other sites
Thank you everyone for your replies and thanks for the link MightMouse.

 

MMS, your comments about getting laughed at by others when talking about single digit monthly returns is timely as I recently read through the "The Truth of Trading" thread. I saw that exact thing, where certain members were infuriated that low rates of return were being discussed as realistic. I suspect it's a bit of cognitive dissonance.

 

The irony is that the low rates of return are not low rates of return at all. Traders who are skilled can make money to the extent that other traders trade irrationally. If everyone were rational, no one would trade. So, technically, traders need for there to be traders who have irrational beliefs about trading.

Share this post


Link to post
Share on other sites

MightyMouse - totally agree -- we shouldn't completely lament the failure of others. It's the single reason why there will always be some who can profit. We absolutely have to have the continual failure of other traders, and a steady stream of new lambs for the slaughter. Just make sure you're not one of them!

 

MMS

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 29th March 2024. GBPUSD Analysis: The Pound Trades Higher But For How Long? The global Stocks Markets are closed due to Easter Friday (Good Friday). The NASDAQ continued to follow the sideways trend while other indices again rose. The SNP500 reaches an all-time high, but the NASDAQ remains under pressure from Tesla, Meta and Apple. The Euro continues to trade lower against all major currencies including the US Dollar, Euro and Japanese Yen. The British Pound is the best performing currency during this morning’s Asian session. However, investors are largely fixing their attention on this afternoon’s Core PCE Price Index. GBPUSD – The Pound Trades Higher but For How Long? The GBPUSD is slightly higher than the day’s open and is primary due to the Pound’s strong performance. At the moment, the British Pound is increasing in value against all major currencies. However, the US Dollar Index is also trading 0.10% higher and for this reason there is a slight conflict here. If investors wish to avoid this conflict, the EURUSD is a better option. This is because, the Euro depreciating against the whole currency market avoiding the “tug-of-war” scenario. The GBPUSD is trading slightly lower than the 2-month’s average price and is trading at 49.10 on the RSI. For this reason, the price of the exchange is at a “neutral” level and is signalling neither a buy nor a sell. The day’s price action and future signals are possibly likely to be triggered by this afternoon’s Core PCE Price Index. Analysts expect the Core PCE Price Index to read 0.3% which is slightly lower than the previous month but will result in the annual figure remaining at 2.85%. The PCE rate is different to the inflation rate and the Fed aims for a rate between 1.5% to 2.00%. Therefore, even if the annual rate remains at 2.85%, as analysts expect, it would be too high for the Fed. If the rate increases, even if only slightly, the US Dollar can again renew bullish momentum and the stock market can come under pressure. This includes the SNP500. Investors are focused on the publication of data on the UK’s gross domestic product (GDP) for the last quarter of 2023: the quarterly figures decreased by 0.3%, and 0.2% over the past 12-months. This confirms the state of a shallow recession and the need for stimulation. The data, combined with a cooling labor market and a steady decline in inflation, increase the likelihood that the Bank of England will soon begin interest rate cuts. In the latest meeting the Bank of England representatives did not see any members vote for a hike. USA500 – The SNP500 Rises to New Highs, But Cannot Hold Onto Gains! The price of the SNP500 rises to an all-time high, before correcting 0.33% and ending the day slightly lower than the open price. Nonetheless, the index performs better than the NASDAQ which came under pressure from Tesla, Meta and Apple which hold a higher weight compared to the SNP500. For the SNP500, these 3 stocks hold a weight of 9.25%, whereas the 3 stocks make up 14.63% of the NASDAQ. The SNP500 is also supported by ExxonMobil’s gains due to higher energy prices. The market will remain closed on Friday due to Easter. However, the market will reopen on Monday for the US and investors can expect high volatility. Investors will also need to take into consideration how the PCE Price Index and the changed value of the US Dollar is likely to affect the stock market next week. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Michalis Efthymiou Market Analyst HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • MT4 is good and will be good until their parent company keep updating the software, later mt4 users will have to switch to mt5.
    • $SOUN SoundHound AI stock at 5.91 support area , see https://stockconsultant.com/?SOUN
    • $ELEV Elevation Oncology stock bull flag breakout watch , see https://stockconsultant.com/?ELEV
    • $AVDX AvidXchange stock narrow range breakout watch above 13.32 , see https://stockconsultant.com/?AVDX
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.